second quarter 2018 earnings conference call · investment grade rating and balance sheet strength....

Second Quarter 2018 EarningsConference Call

Forward-Looking Statements

In addition to historical information, this presentation

contains "forward-looking" statements that reflect

management's expectations for the future. The words

“anticipate,” “believe,” “expect,” “hope,” “have the intention

of,” “might,” “plan,” “should” and similar expressions

generally indicate comments on expectations. The final

results may be materially different from current expectations

due to several factors, which include, but are not limited to,

global and local changes in politics, the economy, business,

competition, market and regulatory factors, cyclical trends in

relevant sectors; as well as other factors that are highlighted

under the title “Risk Factors” on the annual report submitted

by Mexichem to the Mexican National Banking and

Securities Commission (CNBV).

The forward-looking statements included herein represent

Mexichem’s views as of the date of this press release.

Mexichem undertakes no obligation to revise or update

publicly any forward-looking statement for any reason unless

required by law.”

Mexichem has implemented a Code of Ethics that rules its

relationships with its employees, clients, suppliers and

general groups. Mexichem’s Code of Ethics is available for

consulting in the following link:

http://www.mexichem.com/Codigo_de_etica.html.

Additionally, according to the terms contained in the

Securities Exchange Act No 42, Mexichem Audit Committee

established a mechanism of contact, which allows that any

person that knows the un-fulfilment of operational and

accounting records guidelines and lack of internal controls of

the Code of Ethics, from the Company itself or from the

subsidiaries that this controls, file a complaint which is

anonymously guaranteed. The whistleblower program is

facilitated by a third party. The telephone number in Mexico

is 01-800-062-12-03.

The website is: http://www.ethic-line.com/mexichem and

contact e-mail is: [email protected].

Mexichem’s Audit Committee will be notified of all complaints

for immediate investigation.

2 Second Quarter 2018 Earnings

http://www.ethic-line.com/mexichem

mailto:[email protected]

3

▪ Opening Remarks

▪ Business Highlights

▪ Financial Highlights

▪ Closing Remarks

Second Quarter 2018 Earnings

Brief Summary of Results


mm US$Second Quarter

Selected Financial Results 2018 2017 %Var.

Net sales 1,968 1,463 35%

Operating income 317 224 42%

EBITDA 423 327 29%

EBITDA margin 21.5% 22.3% -84 bps

Net majority income 162 67 142%

Cash Flow before dividends 150 76 97%

Free cash flow 88 50 76%

1

$-

$50

$100

$150

$200

$250

$300

$350

$400

$450

1 2 3 4

2013 2014 2015 2016 2017 2018

EBITDA by Quarter (US mm)

2

Quarter Sales EBITDA

mm US$ 2Q17 2Q18 %Var. 2Q17 2Q18 %Var.

Vinyl 571 642 12% 141 161 14%

Fluent 770 1,144 49% 124 180 45%

Fluor 179 230 28% 73 105 44%

Eliminations/ Holding (57) (48) -16% (11) (23) 109%

Mexichem Consolidated 1,463 1,968 35% 327 423 29%

3

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Second Quarter 2018 Earnings

Strong Performance by Business Group


X% EBITDA margin

Note: Breakdowns consider figures before eliminations. Total figures consider eliminations.

Organic Revenues: Exclude: i) Netafim´s results and ii) FX translation effect.

Organic EBITDA: Exclude: i) CADE and Netafim Ltd. Acquisition related expenses, ii) Brazil tax legal settlement benefit and iii) the same items mentioned in organic revenues

327 423

529

753

141 161 224 313

124 180

202

283

73 105

123

189

2Q17 2Q18 IH17 1H18

Vinyl Fluent Fluor

1.46

1.97

2.86

3.72

571 642 1.17 1.29

770 1.14

1.47

2.09

179

230

318

434

2Q17 2Q18 IH17 1H18

Vinyl Fluent Fluor

1.461.82

2.863.30

571 624 1.17 1.24

770 1.02

1.471.73

179 225

318 419

2Q17 2Q18 IH17 1H18

327

522 529

843

141 158 224 307

124

286 202

386

73

102 123

182

2Q17 2Q18 IH17 1H18

30%

38.7%

45.7%

15.7%

21.5%

40.8%

24.7%

22.3%

13.7%

18.5%43.5%

24.3%25.1%

16.1%

19.1%

13.5%

42%

29%

EBITDA

US$mm

Revenues

US$Billion

35%

20.2%

15%

38.7%45.3%

28.1%

28.7%

40.8%

24.7%

22.3%

13.7%

18.5% 43.4%

24.8%

25.3%

16.1%

19.1%

22.4%

59%

60%

24%

25.6%* Organic EBITDA

* Organic Revenues

EBITDA Evolution


31%

12%

11%9%

37%

EBITDA 2Q'17

Resins, Derivatives and PMV UpstreamSpecialty Resins and Compounds DownstreamFluent

57% of Group EBITDA

produced in Specialty

Products

23%

10%

13%

14%

29%

11%

EBITDA 2Q'18

Resins, Derivatives and PMV UpstreamSpecialty Resins and Compounds DownstreamFluent Netafim

67%of Group EBITDA

produced in Specialty

Products

Strong Cash Generation Despite Seasonality


1) PMV's insurance A/R is not

included in trade working

capital calculation.

2) Trade working capital

variation (Jun 18 vs Dec 17)

includes Netafim’s proforma

results for comparative

purposes.

Second Quarter January - June

mm US$2018 2017 %Var. 2018 2017 % Var.

EBITDA 423 327 29% 753 529 42%

Taxes paid (78) (40) 95% (132) (70) 89%

Net interest paid (49) (36) 36% (94) (72) 31%

Bank commissions (11) (8) 38% (22) (13) 69%

Exchange rate gains (losses) (22) (16) 38% (32) (12) 167%

Change in trade working capital (1) (2) (44) (91) -52% (261) (233) 12%

Operating cash flow before capex 219 135 62% 212 129 64%

CAPEX (Organic) (65) (46) 41% (126) (95) 33%

CAPEX (Total JV) (5) (24) -79% (11) (86) -87%

CAPEX JV (OXY share) - 11 -100% - 39 -100%

NET CAPEX JV (5) (13) -62% (11) (47) -77%

Total CAPEX (organic & JV) (70) (60) 17% (136) (142) -4%

Cash flow before dividends 150 76 97% 76 (12) N/A

Shareholders' dividend (62) (26) 138% (136) (53) 157%

Free cash flow 88 50 76% (60) (65) -8%

PMV's insurance A/R 268 - 268 -

Free cash flow after Insurance 355 50 610% 207 (65) N/A

Investment Grade Rating and Balance Sheet Strength


Net debt USD includes $0.6 million of letters of credit with maturities of more than 180 days that for covenant purposes are considered gross debt,

although they are not booked in the accounting debt.

Last Twelve Months

Jun 2018 Dec 2017

Net Debt USD million 2,748 1,356

Net Debt/EBITDA 12 M 1.98x 1.23x

Interest coverage 6.21x 5.67x

Manageable Debt Profile & Long-Term Maturity Profile


Long-Term Debt ScheduleUS$MM, as of June 30th, 2018

95%

3%2% 0%

Holding Vinyl Fluor Fluent

73%

25%

2%

US$ Euro Others

Source: Company filings

US$1.5B revolving credit facility

(100% available)

Most Debt at Hold Co LevelDebt by Division (2Q18)

Alignment of Debt to Revenue CurrencyDebt by Currency (Swapped, 2Q18)

Conservative Leverage Ratios

2.4x

3.0x

2.6x 2.6x2.9x 2.8x

1.0x

2.0x 1.9x 1.8x

1.2x

1.98x

2013 2014 2015 2016 2017 2Q18

107.88 14.00 68.94 10.34 0.34 0.05

151 328151

26

901

500400

750

500

2018 2019 2020 2021 2022 2023 2027 2042 2044 2048

Netafim

Investment Grade

Fitch Ratings BBB

S&P BBB-

Moody’s Baa3

0.05

▪Debt Average Life

14.3 years

▪Weighted Average

Cost of Debt 5.11%

Profitability


7.7 7.6

9.8 11.5

14.4

J U N - 1 7 S E P - 1 7 D E C - 1 7 MA R - 1 8 J U N - 1 8

ROE (%)Mexichem Group

6.8 7.2 8.2

7.5

8.7

J U N - 1 7 S E P - 1 7 D E C - 1 7 MA R - 1 8 J U N - 1 8

ROIC (%)Mexichem Group

ROE: Income from continuing operations / Adjusted Average Equity from continuing operations

ROIC: Adjusted NOPAT for continuing operations/Adjusted Equity from continuing operations + Liabilities with cost – Cash.

Income from continuing operations and NOPAT (EBIT-taxes) consider trailing twelve months.

Ending a Capital Cycle(in USD terms)


253 251302

460

666

414

289

2011 2012 2013 2014 2015 2016 2017

Capex

$657 $634 $722 $817

74.0% 69.7%

78.0% 74%

2014 2015 2016 2017

asd

(EBITDA – non M&A capex) / EBITDA

In 2017 We Achieved Record Results and Expect Another Year of Strong Growth in 2018

▪ In 2017 we met high-end of EBITDA guidance range

▪ For 2018 we expect an EBITDA growth to be between 25%-30%


Revenue ($mm) Adj EBITDA ($mm) and Margin (%)

$5,485 $5,584 $5,344$5,828

2014 2015 2016 2017

$814 $895 $895$1,106

14.8% 16.0% 16.7% 19.0%

2014 2015 2016 2017

EBITDA

Margin

▪ Our cash conversión is above 70%

▪ In 2017 FCF increased 123% from$90m to $201m

EBITDA1 – non-M&A capex ($mm) and Conversion (%)2

+9% +223bps

second quarter 2018 earnings conference call · investment grade rating and balance sheet strength....

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